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Halfway through budget year, Flossmoor board cautiously optimistic

By Carole Sharwarko on December 25, 2017 - 11:59am

With an active six months of the 2017-18 fiscal year under its belt, the village of Flossmoor faces some potentially tough financial decisions. As the board of trustees wrestles with questions about infrastructure improvements, residents must consider approving a sales tax increase that village administrators claim is critical to keep the budget on safe ground.

Village Manager Bridget Wachtel laid out the mid-year budget review at the board meeting on Dec. 18, offering numbers, charts and context for the village’s financial health.

“The biggest pressure is what we foresee as a continued use of the General Fund balance to support operations,” Wachtel said. “That’s not sustainable long-term. It’s a systemic problem we’ll have to address one way or another.”

There are several factors affecting the budget as the village enters the second half of the fiscal year:

Water costs

Critical, fairly extensive repairs to the Vollmer Road Reservoir over the summer cost just over $208,000, an expense that would normally be assigned to the Water and Sewer Fund. However, the recent water main repairs under Butterfield Creek and water loss from leaks have stressed the fund. This expense can be paid from the General Fund, but it is normally not used for such operating expenses.

On the plus side: If budget projections stay on track, the reservoir repair bill can be paid from the Water and Sewer Fund, which is the board’s preference. Also, the repairs have resulted in a 150,000- to 200,000-gallon-per-day savings.

Economic development

According to Wachtel, Flossmoor’s Meijer superstore hasn’t performed as well as expected since its June 2016 opening while the Buona Beef restaurant and Starbucks/ATT&T development projects have been delayed, both leading to lower-than-expected sales tax revenues. Overall, the village has collected $81,000 less in sales tax than what was budgeted.

Also, the village does not yet know the full property tax potential of the Meijer store, because it opened so recently and has not yet been fully reflected on the tax rolls. It likely will remain an unknown factor until summer 2018, when the Cook County Clerk releases the new tax rates.

On the plus side: Although it is not yet clear how Meijer's property tax valuation will impact budget revenues, Wachtel said the board was as aggressive as possible in approving the levy, listing the property at the full level to maximize the future benefit to the village.

Other issues

Because of a State of Illinois change in distributions, the village will incur a 10 percent reduction in state income tax revenues beginning in January, equating to about $109,000. Wachtel said the village’s share of the state income tax is its second-largest revenue factor.

At the same time, stagnant property values and business decline are causing continued low property tax revenues and sales tax revenues. Any new revenue, such as increased sales tax revenue from Meijer, Wachtel said, is only serving to plug these holes.

On the plus side: The village saved $192,436 in personnel expenses in the first half of the fiscal year. Also, the village’s interest income for the first half of the fiscal year is higher than budget projections by $34,000, while income from building permits was higher by $32,000. The village also came in under budget on fuel costs, ambulance fees and other expenses.

Aging infrastructure

The village’s infrastructure challenges are straining its budget, and Trustee Perry Hoag called the aging local streets and sidewalks “the elephants in the room” during the budget discussion. What’s worse, Wachtel said, is lines of revenue that previously offset the cost of infrastructure improvements — such as state grants and legislative set-asides — have dried up, victims of the state’s fiscal crisis.

“Especially for small to mid-size projects, the legislative set-asides were a lifeline for us to get these projects done,” she said. “Those are harder to find now, and it’s putting more pressure on local agencies to find the money elsewhere.”

The infrastructure challenges in Flossmoor are not unique to the municipality.

Smaller towns and major cities alike throughout the country face difficult decisions between providing resident services and maintaining vital infrastructure.

“All municipalities are struggling with infrastructure improvements,” Wachtel said. “The older the community, the more you have to do and the more expensive it is. In the infrastructure world, these expenses are millions of dollars.”

What’s next?

In a follow-up interview, Wachtel said the village administration is optimistic about the financial future. However, she emphasized that Flossmoor’s budget will reach critical mass in 2020 if new lines of revenue aren’t identified.

One initiative the board has put forth is introducing a non-home rule village sales tax increase proposal on the March 20 ballot. The board expects it will further capitalize on the Vollmer Road business development. It would add 1 percent to most items sold in Flossmoor, excluding most grocery items and medications.

“The non-home rule sales tax is just one part of the effort. It won’t, by itself, solve things. It’s significant, but it’s not the only thing,” Wachtel said.

She said the village has cut as much as possible from operating expenses, and the budget problem can’t be solved with “pencils and paper clips.” Only new revenue will keep the village finances stable, Wachtel said.

Some Flossmoor residents have suggested the board holds the village purse strings too tight, that it should use available cash before imposing a new tax. Wachtel said the village administration is reluctant to overextend the cash reserves.

“I think we are conservative and I think it’s benefiting us, because we’re not out over our skis. The board has a long history of spending with cash as much as possible because cash is always cheaper than debt,” Wachtel said. “We try to see what’s coming down the line. We’re planning for it and saving for it, and ultimately that is the most cost-effective for everyone involved.”

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